Why You Should Get to Know a PE Firm Before You’re Ready to Sell Your Company
Could you name two or three accounting firms? Two or three law firms? Probably. Now, what about a private equity firm (relevant to your company’s size and industry)? Most owners could name several accountants or lawyers. But many wouldn’t be able to do the same for private equity firms. Why is that? Some may say it’s because they aren’t ready to sell their company or take on an investor, so there’s no point in getting to know a private equity firm until then. We disagree. Building a relationship with a private equity firm can be a useful connection for a company, regardless of when or if they are planning to sell. Below, we’ve provided four reasons you should get to know a private equity firm before you’re ready to sell.
#1 Build trust with potential buyers/investors
The middle of a sale process is a stressful and busy time, but it is often the first time owners are meeting and getting to know potential buyers. This process – by nature often more formulaic and brief – makes it harder for sellers to feel like they know enough about a buyer and their values, or to develop a strong sense of trust that their legacy and decades of hard work will be protected.
In contrast, connecting with and learning about private equity firms before you’re considering a transaction provides the opportunity to build authentic rapport over time. You can hear from firms about their experience and how they work with other companies, but also test that over time through their track record, the content they publish, and what others say about them. Even if you don’t end up selling to a firm you know, if you’ve come to trust them you can use them as a yardstick against which to measure other potential buyers, especially in terms of authenticity and values. In the best case, when the time comes to start a sale process, you already have a head start on a list of potential buyers that you feel comfortable with.
#2 Learn about the sale process
Selling your company is a complex process, one that many owners know little about prior to experiencing it themselves. Some firms, like Montage Partners, provide free educational content on their website or social media channels designed to educate owners on the transaction process. These materials can be general – relating to types of transactions or the broader mergers and acquisitions market – or more specific in terms of how the process works at that firm. At Montage Partners, we provide both general and firm-specific educational content for owners, many of which can be relevant before contemplating a sale (check out our Exit Planning infographic or our blog on Data You Should Be Tracking as examples). Engaging with a private equity firm that provides this type of education can help demystify the transaction process for owners, making the prospect feel more accessible and providing actionable steps owners can take now to prepare for this process down the road.
#3 Read/watch their content
Along those same lines, some private equity firms share content about more than just the sale process. For example, Montage Partners publishes content that shares both general and industry-specific best practices gleaned from across our partner companies. We also provide insight into what it’s like to work with our firm, in our own words and through videos and interviews with our partner companies’ leaders. As you look to connect with private equity firms, see what kind of content they provide. Not only could you learn more about the people and values of each firm, but you likely will gain valuable business advice you can implement as you continue to build and grow your company.
#4 Use them as a sounding board
As with other business connections, you may find that getting to know a private equity firm provides you with a new sounding board as you work through business problems or think through creative growth plans. Their ability to draw on a variety of different examples from across industries offers a unique perspective.
Adding a private equity firm to your network provides you with access to a vast ecosystem of insights and experiences you can draw on as you seek to grow your company. You’ll also learn more about what a potential sale process looks like prior to entering one, and gain rapport with potential buyers, making your future transaction less stressful. At Montage Partners, we welcome outreach from owners, regardless of whether you are looking to sell your company now or you’re years away.
